Africa urged to accept private sector

African countries and their international development partners must be pragmatic, rather than ideological, over the role of the state and the private sector in alleviating persistent extreme poverty and inequality on the continent, a senior World Bank official has told Emerging Markets.

Makhtar Diop, the Bank’s vice president for the Africa region, said people were no longer interested in the “hot debate” of 15 years ago over the role of the state and the private sector. This especially applies in higher education, which has at times been neglected by development actors, with the result that quality has fallen, he said.

“At some point we said higher education is a luxury good in Africa, because the poor don’t access it. We should let the private sector do most of it,” Diop said, but added “It is not true. Maybe for an MBA or business programme, we should let the private sector run it. But run a science programme? Run the quality of education, make sure that universities have standards? That is still the role of the state.”

His comments came as the founder of an Africa-focused investment fund said governments needed to help divert more capital into the continent’s fastest-growing private-sector enterprises.

Sandeep Mehta, president of London-based investment management firm Sachi Investments, which is currently in the throes of setting up a $200 million Africa-focused fund, told Emerging Markets that African authorities are “far too focused on the public sector. This is absolutely a problem. Funding private-sector SMEs [small and medium-sized enterprises] is not a priority” for African governments.

During the World Bank’s “State of the Region” presentation to African finance ministers and central bank officials yesterday, the institution pointed to the relatively poor performance of the continent in reducing poverty, despite its high growth rates.

On a per capita basis, the continent’s growth looks less impressive than its absolute growth rates, which have been high and positive for a decade, and poverty reduction has been sluggish, relative to other emerging regions. In 1990 South Asia, East Asia and Africa all had similar poverty levels. Since then East Asia’s poverty rate has fallen by 44 points; Africa’s has fallen by eight.

Francisco Ferreira, the Bank’s Africa economist, pointed to the success of cash transfer programmes pioneered in Latin America, which reduced poverty rates, as families use the money to improve nutrition, healthcare and education—all determinants of future development.

However, the minister of economic affairs and development of Mauritania, Sidi Ould Tah, told the meeting he felt handouts could engender a culture of dependency and pointed to the failure of food systems in the wake of handouts during the Sahel droughts in the 1970s and 1980s. “There is a possibility we would reinforce that attitude in the population,” he said.